Bitcoin and other cryptocurrencies experienced a drop on Monday, approaching important price levels. This decline coincided with a wider slump in risk-sensitive assets, as investors brace for several macroeconomic catalysts that could impact the crypto market in the coming days.
Bitcoin, the largest digital asset, saw a 2% decrease over the past 24 hours, falling below $26,100. This brings Bitcoin close to the key $26,000 level, which has provided support for the cryptocurrency for over a month. After briefly trading above $27,000 last week, Bitcoin has struggled to maintain its recent gains.
Trading volumes and volatility for cryptocurrencies remain historically low, indicating a waning interest from investors. The crypto space is known for its wild price fluctuations, but the current calmness suggests a decrease in investor participation. Traders are eagerly awaiting a decision from the Securities and Exchange Commission (SEC) regarding spot Bitcoin exchange-traded funds. However, it could still be months before the SEC announces any potential developments in this area.
Similar to the stock market’s Dow Jones Industrial Average and S&P 500, Bitcoin has been influenced by macro catalysts that could impact the outlook for interest rates. The Federal Reserve’s decision to raise or lower interest rates can significantly influence investor behavior. Higher returns on risk-free assets like cash or government debt reduce the appeal of riskier investments like Bitcoin. Therefore, the question of whether the Federal Reserve will raise interest rates in November or consider lowering them becomes crucial for the cryptocurrency market.
Economic data plays a crucial role in shaping market sentiment. If signs of a strong U.S. economy emerge, the Federal Reserve might not lower interest rates. Conversely, indications of weakness in the economy could prompt the central bank to adopt a more accommodative stance.
In addition to Bitcoin, other cryptocurrencies also experienced declines. Ether, the second-largest cryptocurrency, dropped 1.5% to $1,575. Altcoins like Cardano and Polygon also witnessed weakness, with declines of 1% and 2% respectively. Meme coins, including Dogecoin and Shiba Inu, also saw decreases of 2% and 1%.
Investors will keep a close eye on economic data releases throughout the week. On Monday, Dallas Fed manufacturing activity data for September and the Chicago Fed national activity index for August will be published. Later in the week, Thursday’s revisions to U.S. gross domestic product over the past five years and the Fed’s preferred inflation measure—the personal-consumption expenditures index—will be released on Friday.
Overall, the price movements of Bitcoin and other cryptocurrencies are currently influenced by broader market dynamics and the anticipation of upcoming macroeconomic events. The decision from the SEC on Bitcoin exchange-traded funds and the Federal Reserve’s interest rate policies will likely play significant roles in shaping the future of the crypto market.